Good reminders. Also, our own federal government put pressure on the companies to give more mortgages to minorities. They wanted the rejection rate to be equal for whites, blacks, and hispanics.
No. The CRA had nothing to do with the no-doc loans or any government regulation.
What happened in the credit market is what happens when the shift of the risk moves to other people. Banks outsourced the job of approving homeowners for loans to the mortgage brokers. The brokers got paid regardless if the homeowner defaulted or not. The Banks pooled those loans and sold them off, so they would get paid regardless if the homeowner defaulted or not. Ibanks repackaged those loans and sold them off, so they would get paid regardless if the homeowner defaulted or not. Hedge Funds, Mutual Funds and Pensions would buy those loans with other people’s money and get paid regardless if the homeowner defaulted or not. So the risk is passed to the two parties with the least amount of information - the average/sub-prime homeowner and the investor.
There was too much cash in the marketplace after 2001 (Bush Tax Cuts, runaway GOP spending & Fed theory) and when the stock market became too expensive, the money moved to corporate bonds, when that got too expensive it went to prime mortgages, then Alt-A, finally to subprime.
The government didn’t force anybody to do anything.